Analysis of Advantages and Limitations of Financial Engineering in Financial Risk Management
Abstract
This paper focuses on the important role of financial engineering in financial risk management, and deeply analyzes the advantages
and disadvantages of this method in the application process. Through the research of this paper, we can see that financial engineering can accurately measure risks, optimize asset allocation and realize risk hedging by relying on advanced quantitative models and innovative financial
instruments. At the same time, the application of this method will face challenges due to the imperfection of model assumptions, insufficient
prediction of extreme events and easy to be affected by irrational factors in the market. Therefore, comprehensive analysis of the actual situation and scientific application of this method are the key to ensure its full effectiveness.
and disadvantages of this method in the application process. Through the research of this paper, we can see that financial engineering can accurately measure risks, optimize asset allocation and realize risk hedging by relying on advanced quantitative models and innovative financial
instruments. At the same time, the application of this method will face challenges due to the imperfection of model assumptions, insufficient
prediction of extreme events and easy to be affected by irrational factors in the market. Therefore, comprehensive analysis of the actual situation and scientific application of this method are the key to ensure its full effectiveness.
Keywords
Financial engineering; Risk management; Advantage; Limitation
Full Text:
PDFReferences
[1] Huang Rongxiang. Innovative methods and strategies of financial risk management [J]. Economic and Technical Cooperation Information, 2019, 40(4):0157-0159. (in Chinese)
[2] Zhang Bingquan. The application of financial engineering in quantitative investment strategy [J]. Market Weekly, 2019, 37(13):101-104.
[3] Liu Jingfeng. Financial Risk Management and its avoidance Strategies in Enterprise financial project Engineering [J]. Journal of
Guangxi Normal University for Nationalities, 20, 37(2):74-77.
DOI: http://dx.doi.org/10.70711/frim.v2i9.5237
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